E-Commerce in India: Evolution, Growth and Challenges

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The report shines a flashlight into the India e-commerce story, detailing how the industry has grown on the back of a fast-multiplying internet population to cross an estimated $10 billion in sales.
It examines how e-commerce is changing the way many Indians are shopping and impacting how businesses function, opening up a world of lower prices and choices and creating wealth for entrepreneurs.
The report also offers insights into the sectors that have made optimum use of this business tool, and details the challenges (payments, logistics, cyber security) and the opportunities (rise of facilitators such as credit and debit cards, growing aspirations of a young market).

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E-Commerce in India: Evolution, Growth and Challenges

  1. 1. E-COMMERCE IN INDIA: Evolution, Growth and Challengesmslgroup.comasia.mslgroup.comindia.mslgroup.comhanmermsl.com2020msl.comContactjaideep.shergill@hanmermsl.comCopyright: MSLGROUP IndiaDesigned & Printed by: MSLGROUP CREATIVE+ A report by MSLGROUP India, a part of the Publicis Groupe
  2. 2. contents Table of 01 | Executive summary 04MSLGROUP IndiaMSLGROUP India is the nation’s largest PR and social media network. Made up of three agencies, 02 | E-commerce Categories 06HANMER MSL, 20:20 MSL and 2020Social, MSLGROUP India combined includes 15 offices, 565 staff • B2Band an activation network reaching an additional 125 Indian cities. With a proven track record of servicing  • B2Cmultinational and Indian corporations since 1989 and 40 senior counselors with 15 or more years of  • C2Cstrategic communications experience, clients, colleagues and business partners benefit from  • C2BMSLGROUP India’s breadth and depth of experience and insights. 03 | Growth of e-commerce in India 08MSLGROUP Asia 04 | Sectors 12For 23 years, MSLGROUP’s Asia team has counseled global, regional and local clients, helping them  • Travelestablish, protect and expand their businesses and brands across this fast-growing region. Today, • AutomobilesMSLGROUP has the largest PR, social media and events teams in Greater China (16 offices and 1,000 • Financial servicescolleagues) and India (15 offices and 575 colleagues) and is actively working to lead the development of  • Stock tradingthe industry with the regular publication of whitepapers/reports and innovative Learning & PeopleDevelopment programs to nurture talent. The MSLGROUP Asia team includes 38 owned offices and • Real estate 1,675 colleagues in Beijing, Shanghai, Guangzhou, Chengdu, Hong Kong, Macau, Taipei, Tokyo, Seoul,  • GiftsSingapore, Kuala Lumpur, Mumbai, Delhi, Ahmedabad, Pune, Bangalore, Chennai, Hyderabad and  • MatrimonyKolkata. An activation network of colleagues reaches an additional 125 Indian and 100 Chinese cities and  • Job searcha strong affiliate partner network adds another 23 Asian cities to our reach. MSLGROUP Asia was  • Online retailingawarded Campaign Asia Pacific’s Network of the Year, 2011 and MSLGROUP Asia’s teams have also been  • Online adsrecognized as leaders by multiple industry groups, including most recently Hanmer MSL India (‘PRAgency of the Year 2011’ by PRCAI), Luminous (‘Local Hero/Agency of the Year 2010’ by Marketing Events 05 | Opportunities 16Asia), Genedigi Group China (‘Innovative China SMEs’ by Forbes China), ICL MSL Taiwan (‘Agency of the  • Global tradeYear 2011’ by Taiwan Advertiser Associate), and won more than 50 awards in the last two years. Learn  • Virtual businessesmore about us at: asia.mslgroup.com+ Twitter + Facebook  • Lower search costs  • The rise of facilitatorsMSLGROUP 06 | Challenges 18MSLGROUP is Publicis Groupe’s strategic communications and engagement group, advisors in all  • Paymentsaspects of communication strategy: from consumer PR to financial communications, from public affairs  • Logisticsto reputation management and from crisis communications to experiential marketing and events. With  • Cyber crimemore than 3,500 people across close to 100 offices worldwide, MSLGROUP is also the largest PRnetwork in fast-growing China and India. The group offers strategic planning and counsel, insight-guided 07 | 10 years from now: 20thinking and big, compelling ideas – followed by thorough execution. Learn more about us at:www.mslgroup.com + http://blog.mslgroup.com + Twitter+ YouTube. E-commerce is dead, long live e-commerce 08 | The e-commerce evolution 22Publicis Groupe 09 | India and the internet 23Publicis Groupe [Euronext Paris FR0000130577, part of the CAC 40 index] is the third largestcommunications group in the world, offering the full range of services and skills: digital and traditionaladvertising, public affairs and events, media buying and specialized communication. Its major networksare Leo Burnett, MSLGROUP, PHCG (Publicis Healthcare Communications Group), Publicis Worldwide,Rosetta and Saatchi & Saatchi. VivaKi, the Groupes media and digital accelerator, includes Digitas,Razorfish, Starcom MediaVest Group and ZenithOptimedia. Present in 104 countries, the Groupeemploys 53,000 professionals. Learn more about us at: www.publicisgroupe.com,Twitter:@PublicisGroupe, Facebook: www.facebook.com/publicisgroupe.
  3. 3. Executive Summary A study by Avendus Capital - a products, raised $150 million financial services firm - said that from Accel Partners and Tiger Indian e-commerce revenues grew to $6.3 billion in 2011, from Global Management, putting its valuation at $850 million. Composition of internet audience $4.3 billion in 2010 and $3.3 billion in 2009. The study While the opportunities are estimated that online retailing myriad, so are the challenges. 45% INDIA would catch up with online travel Foremost among them is finding ASIA-PACIFIC a way to grow the customer base. 40% by 2015, each contributing $12 WORLDWIDE billion in revenues. What is needed, said industry sources, is a quantum leap - 35% K Vaitheeswaran, founder of getting at least 25% of internet Indiaplaza.com, India’s oldest users to start transacting online 30% online retailer, told ‘China Daily’: from the present 6%-8% 25% “In 1999-2000, only 3 million (E-commerce, excluding travel). people used the internet and out 20% of that, only about 15,000 to Logistics – timely deliveries, 20,000 users were shopping ensuring against damage during shipments, return of products 15% online. Today that 3 million has grown to over 100 million. More and reversal of faulty transactions – are a problem too, 10% importantly, those 20,000 online buyers have grown to as is the poor bandwidth and 5% over 14 million.” unreliable internet connections. English is the dominant language 0% The benefits are clear to 15-24 25-34 35-44 45-54 55+ consumers – convenience, lower of e-commerce, but only 35% (estimated) of the population years years years years years prices and price comparisons. As Pankaj Jain, consultant at Tlabs speaks it. As the internet adapts and lead organiser at Startup and assimilates different Source: Comscore State of the Internet With a Focus on India (2011) Weekend said: “Customer languages, the industry will have In the second half of 2011, as online shopping retailer, to the service is the key. If you can to follow suit to ensure its India’s 100 millionth internet ‘China Daily’ (April 20, 2012), an build a customer-centric e- customer base expands. user logged on and the number English language newspaper. commerce company in India that Besides, the problematic supply of mobile phone users crossed provides a Zappos-like chains could be a deal-breaker. Growth of online population 600 million, it became clear He claimed that Myntra.com experience, you will have a that the foundation for an e- was doubling its revenue every The sizeable investments, major edge over other e- commerce revolution had been four to five months, which was however, are allowing Indian commerce businesses.” laid. the trend across the industry. firms to build delivery channels The rise of smartphones, secure and devise payment systems. The internet is already Ravi Srinivasan, veteran transaction gateways, banks Cash on delivery, for instance, is 13% changing the way connected business journalist, said: “E- going online with a vengeance the preferred payment option in 19% Indians shop. Not only has it commerce is a force multiplier and the easy issue of credit and India and will remain so until opened up a new world of lower for retail. Whatever retail does debit cards have aided e- consumers feel secure about prices and choices, it has also for the economy, e-commerce commerce. parting with their credit card MARCH emerged as a wealth-creating improves and enhances. The primary advantages are All this has attracted investors in numbers online. All leading 2010-2011 tool for entrepreneurs. players have introduced this reducing the cost of a big way; in 2011, the sector Given the size of the Indian intermediation, enhancing received investments of more option. 20% market and growing consumer information and than $1 billion. The industry is now betting on consumerism, industry sources choice and ‘democratising’ 18% In January 2011, Snapdeal.com, India’s young consumers – more aren’t surprised that e- retail. All of these would go than half the population is under commerce companies are towards increasing choice and an online deal shop, raised $12 million and another $40 million 25 years of age and more than reporting double-digit growth. lowering cost for consumer.” 65% under 35 years – to push INDIA “Most e-commerce ventures, at a valuation of $100 million six Online ticketing and banking months later. Meanwhile, online growth. CHINA particularly online retail, are experiencing phenomenal services are already popular, but retailers Fashionandyou.com Understanding consumer RUSSIAN FEDERATION growth with online transactions Indians are only just dipping and Myntra.com raised $40 behaviour and building online BRAZIL growing by leaps and bounds their feet in the e-commerce million each. brands will be the key. How will every month,” said Mukesh pool. Slowly, the comfort level Indian e-commerce firms adapt? is extending to other products Flipkart, the books retailer which Source: Comscore State of the Internet With a Focus on India (2011) Bansal, CEO and founder of has now diversified into various The next decade will tell. Myntra.com, a Bangalore-based and services.04 05
  4. 4. E-commerce categories promote investment, trade Business-to- stocks and forge financial Consumer-to- Business (B2B) alliances. Consumer (C2C) Originally coined to describe C2C commerce is the oldest electronic communication Business-to- form of trade and has existed between businesses or long before the web. However, enterprises, Business-to- Consumer (B2C) global connectivity has given it Business or B2B is now a different dimension. Simply put, B2C transactions commonly used to describe all are direct dealings between Such transactions are yet to products and services used by businesses and consumers. A make a significant impact on enterprises. Business-to- relatively new category, B2C web-based commerce. Auction Business covers the entire started gaining momentum in sites are one example of such gamut of e-commerce that can the late 1990s when the internet business. When individuals occur between two became more accessible. This have to sell goods, they list organisations. category includes everything, them on auction sites where Transactions between industrial from information searches and others can bid. This transaction manufacturers, partners and electronic shopping to involves consumer-to- retailers, or between interactive games delivered consumer interface. These may companies, primarily fall into online. or may not involve a third-party this category. like in the case of the auction- Some share of e-commerce exchange eBay. B2B activities include revenues is generated from B2C purchasing and procurement, transactions. One of the biggest challenges supplier management, that C2C faces is lack of trust. With a huge number of travel inventory management, The lack of a reference point portals, railways and airlines channel management, sales makes it difficult for buyers to have played a significant role in activities, payment feel confident about the people e-commerce transactions in management, and service and they are dealing with. Both India. Recently, support. Tradeindia.com, India’s buyer and seller are unsure of Makemytrip.com registered a largest B2B portal, maintained the quality of goods, credibility turnover of Rs 1,000 crore by Infocom Network Ltd, and payments. ($200 million). In 2007-08, observed that e-commerce travel alone constituted 50% of transactions in India show a Rs 4,800 crore ($960 million) growth rate of 30% to 40% and online market. Consumer-to- will soon reach the $100 billion mark. In the last few years online Business (C2B) services like banking, bill International brands are keen to In this business model, it is payment, ticketing, hotel room make the most of the growing consumers who offer products booking, matrimonial sites and Indian market and are relying on and services to companies. In job sites are getting increasingly the web to exploit the customer India, C2B is at an early stage. popular. With the stock base. Tradeindia.com, C2B connects a large audience exchange, too, coming online, Matexnet.com, to a bi-directional network there has been a tremendous AuctionIndia.com, through the internet. The boost in the online business. Indiamart.com, accessibility of the web and TeaAuction.com, However, B2C still has a long technologies like digital MetalJunction.com, Chemdex, way to go to be on par with B2B printing, high-performance Fastparts and FreeMarkets are in India. This is mainly because computers and powerful some of the leading B2B B2B transactions are of much software are leading people to exchanges. greater value than B2C. take this medium seriously. Over the years, the scope of B2B transactions has broadened. Moving on from sales, corporations are now using B2B communications to06 07
  5. 5. Growth of e-commerce in India a business model, it appeals to million people online using the ‘value-minded’ Indian services through mobiles, mindset, which is about getting tablets, handhelds or personal E-commerce in india the best value for money computers. It’s all merging, and spent,” said Nelson D’Souza, it’s happening very fast.” general manager, 10,000 Fundsupermart.com, one of The Internet and Mobile Asia’s largest distributor of Association of India (IMAI) 6,790 mutual funds online. “Around estimated that India’s e- the world, e-commerce has commerce market is growing 4,230 brought in ‘bargain hunting’, 70% every year; 500% since 3,015 which is common to middle- 2007. In 2010, it was estimated 1,750 classes around the world. The at $6.79 billion, dwarfing its 31.38 103.84 success of Flipkart and 2007 value of $1.75 billion. By Snapdeal shows that e- the end of 2011, the e- 1998-99 1999-00 2007-08 2008-09 2009-10 2010-11 2011-12 commerce market is expected (projected) commerce is here to stay.” to have hit $10 billion. At present, travel leads the pack among e-commerce While it is expected that travel TRANSACTIONS (IN $ MILLION) segments, flourishing on the will remain the dominant sector, back of growing disposable e-tailing and digital downloads incomes and an internet-savvy will probably grow at a faster Source: ‘Indian Ecommerce Report’ by Internet and Mobile Association of India and IMRB urban population. However, rate. other segments such as retail, Home Internet usage in India classifieds, jobs, matrimonials grew 19% between April 2006 and downloads are doing well and April 2007, when it reached too. 30.32 million users. By the end of 2011, there were an Market share in 2010 Mobile commerce, which is only just being introduced in estimated 100 million Internet India following the boom in users. With a middle class of telephony, could prove to be a nearly 300 million, these Other services Downloads stable complement e- numbers can only grow. 5.09% 2.12% commerce. “The future is certainly going to Financial services show an upward trajectory – 6.31% Mehul Patel, a serial entrepreneur who founded competition will heat up, more E-tailing KIPL, a new media consultancy, players will come in and then 6.48% and Mozomo, a mobile there will be a consolidation in commerce consultancy, the market,” said Amrit Ahuja, believes that the shift is already vice-president, 20:20 MSL. “A happening. His definition of new breed of aggregators will ‘mobile commerce’ includes arise for customers to visualise iPads and tablets, apart from the multiple deals available; cellphones. “There are more expect a new business model E-commerce in India is still advances in technology, too.” nascent, but it is important for growing adoption of computers, and more Android, iOS and developing countries like India. introduction of 3G and falling Blackberry apps today in India The opportunities for e- net access costs. than ever before. Most of our Online travel clients now have a dedicated 80% commerce players are many – rapid urbanisation and rising “E-commerce is probably the smart apps budget,” he said. “I literacy rates, rapidly growing best thing that has happened to am highly optimistic that by the Indian middle-class and 2015 we will have close to 400 Source: Comscore State of the Internet With a Focus on India (2011) internet user population, emerging small businesses. As08 09
  6. 6. It’s clear that from the data that a range of products and Besides, India is on a growth market share is moving towards services – from movie tickets path, accelerating India and especially China. and flowers to electronics and consumerism. Growth will aid China’s share of regional B2C e- insurance. With stock the rise of e-commerce, which commerce will grow from 4.1% exchanges coming online, e- in turn will spur more in 2006 to 14.3% by 2011. Here, commerce has arrived in India. commerce. too, travel will be the largest category. However, the business landscape is not without “The Chinese are way ahead on challenges. Credit cards are not the e-commerce front. The ubiquitous and the payment massive success of local sites challenges are myriad. such as Alibaba reverberate the Logistics, especially in the case growth story for e-commerce in of deliveries to consumers, are China. E-commerce businesses a problem. have managed over 10% of the GDP in some countries. India These problems are being has a lot to catch up on. In 10 resolved. While the delivery years, we will be probably where system – via courier and post – China and the world are today,” has improved, modern said Fundsupermart’s D’Souza. technology like secured socket layer (SSL) has helped protect Ahuja, however, disagreed. “In consumers against payment 10 years, the Indian market will fraud. Banks, too, have be at par with the US and China successfully adapted as most of the pain points will technologies to provide be sorted out, consolidation will customers with real-time have happened and profitable account status, transfer of funds models will have evolved,” she and stop-payment facilities. said. There are regulatory challenges While Indian consumers are too. As investment rules in India less wary of buying train or liberalised and it became easier airline tickets online, most to move large amounts of agree that the market will money into and out of the mature only when consumers country, 100% foreign direct start buying more expensive investment (FDI) in e- categories such as apparel, commerce was ushered in. home furnishings and jewellery. However, there were riders: FDI was allowed only in B2B e- Globally, the lifestyle category commerce activities and not in E-commerce sales (in $ billion) in dominates e-commerce with a retail, and 26% of FDI must be 64% share of transactions, said A-Pac (2006-11) the eBay Census Guide of 2009. divested to the Indian public within five years if the The guide said that South India companies are listed in another has the most active buyers (41% country. Country/Year 2006 2007 2008 2009 2010 2011 of all transactions), followed by Therefore, FDI in B2C e- Australia 9.5 13.6 20.4 26.4 28.7 31.1 West India (27%). However, commerce firms is not China 2.4 3.8 6.4 11.1 16.9 24.1 West India has the most active automatic; approvals must be India 0.8 1.2 1.9 2.8 4.1 5.6 sellers (46%), followed by sought from the Foreign North India (28%). Investment Promotion Board, Japan 36.8 43.7 56.6 69.9 80 90 There has been a rise in the which considers applications on South Korea 9.6 10.9 12.4 14 15.9 17.9 number of companies taking up a case-to-case basis. Asia-Pacific 59.9 73.3 97.7 124.1 145.5 168.7 e-commerce; major portals are As systems and regulations shifting towards e-commerce improve, the volume of instead of relying on transactions will rise. Source: e-Marketer, data includes projections for 2009, 2010, 2011 advertising. The sites are selling10 11
  7. 7. Sectors as per themes – trekking, (insurance and banking), CAMs – an insurance repository. The Today, in India, Travel adventure, wildlife, history, leading players in this segment include Policybazaar.com, Gifts several goods and This is the most popular category in India. The deals culture, etc. In 2010, industry Indiainfoline.com and banks such as ICICI, Axis and HDFC. Before the advent of the internet, if you had to buy a gift, estimates put the online travel services are bought offered on tickets – rail and air – business at $6 billion. India’s you’d most likely visit the as well as on hotel stays and nearest store and look through online. The e- tours are major draws. Many leading travel portals are the shelves, sometimes for Makemytrip, Yatra, Cleartip and commerce sites categorise their offerings Travelguru. Business/finance sites growth hours. Gift sites have enabled consumers to reduce the time landscape includes spent on this activity. Now, you companies that INTERNET USER PENETRATION (MARCH 2010) can browse through various categories - toys, perfumes, provide a single Travel sites growth INTERNET USER PENETRATION (MARCH 2011) jewellery, accessories - and buy what you like in a matter of product or service minutes. as well as multi- INTERNET USER PENETRATION (MARCH 2010) INTERNET USER PENETRATION (MARCH 2011) 47% 49% 47% 46% product or multi- 41% 39% Matrimony service firms. These portals provide seekers with information on potential 40% matches and can include These include 35% 31% 31% information such as the city of clothes and 23% 22% residence, religion and caste. INDIA ASIA - PACIFIC WORLDWIDE Allied services include accessories, health astrological matching, legal and beauty Source: Comscore State of the Internet With a Focus on India (2011). help, beauty, clothing, etc. India’s leading matrimony Internet audience 15+ accessing Internet from Home or Work products, books INDIA ASIA - PACIFIC WORLDWIDE portals are Shaadi.com, Jeevansathi.com, and magazines, Bharatmartimony.com and computers and Source: Comscore State of the Internet With a Focus on India (2011). Internet audience 15+ accessing Internet from Home or Work Indiamatrimony.com. peripherals, cars, Stock trading Real estate This category is rapidly gaining These sites provide information software, form. E-policies, said the prominence in India, based on on properties users wish to buy, electronics, home Automobiles newspaper, will be available its economic performance and sell or rent. They allow you to On these sites, you can buy and across the life, motor and the impact of growth on stock search by location, cost, size, appliances, sell cars and two-wheelers. health segments. The regulator markets. The services include etc. Normally, the site provides These include new and used buying and selling of stocks, you with the contact details of entertainment, real vehicles. Some of the services is said to be in the midst of infrastructure checks and might market analysis, research, the buyer/seller/broker. There estate and jobs, to these firms provide are: start allotting licences by June company profiles and data, are several allied services, too, Research, reviews, evaluation, 2012. stock performance over time which make these portals one- name a few. technical specifications, and buying of mutual funds. stop shops for consumers and insurance and finance. Quoting industry sources, the The advantage is that you no provide the portals with several newspaper said ICICI Prudential longer need a stock broker, and revenue streams. These Life Insurance and Birla SunLife the commissions are a fraction services include housing Financial services Insurance would be among the first to launch. While customer of what broking houses charge. finance, loan instalment While banking services have calculators, loan rate uptake may be low initially – 2% Leading stock trading websites been available for a while comparisons, loan eligibility to 5% of new business – it include Sharekhan.com, online, financial products such calculators, insurance, interior would rise to 10% to 15% within ICICIDirect.com, as mutual funds can also be design and packers and movers. a year. Indiabulls.com, Religare.com, purchased off the internet now. Indiainfoline.com and Some of the leading realty “Policy holders will understand 5Paisa.com. Many banks, such portals are Magicbricks.com, The ‘Business Standard’ the ease of owning an e-policy as Axis and HDFC, also offer the Makaan.com, Indiaproperty.com newspaper recently reported and gravitate towards it,” said service. and 99acres.com. that insurance policies may KR Chandrasekaran, head soon be issued in electronic12 13
  8. 8. technology brings, can provide a range of goods and services at Online ads Personals sites growth discounted prices. India is Retail sites growth Indians access the internet expected to have the third largest from home, office and on their internet user base by 2013, which phones. There is a large INTERNET USER PENETRATION (MARCH 2010) INTERNET USER PENETRATION (MARCH 2010) population that now uses the is a major opportunity for online INTERNET USER PENETRATION (MARCH 2011) retail stores. INTERNET USER PENETRATION (MARCH 2011) internet as its primary source of information and bases its ‘Campaign India’ (February 24, purchase decisions on what it 2012) said that the ecosystem views online. No wonder, then, 14% 63% 63% 13% required for online retailing to 55% 56% that advertisers have identified 54% flourish in India is at an inflection 47% the internet as the primary 9% point. “Rising standards of living medium for marketing their 8% and a burgeoning, upwardly businesses. Online advertising 5% 5% mobile middle-class with high is expected to grow disposable incomes, availability of exponentially – in 2008-09, a much wider range of products... industry estimates pegged and lower prices compared to growth at 38%; in 2009-10 it INDIA ASIA - PACIFIC WORLDWIDE INDIA ASIA - PACIFIC WORLDWIDE brick and mortar retail driven by was estimated at 32%. disintermediation and reduced Source: Comscore State of the Internet With a Focus on India (2011). inventory and real estate costs Source: Comscore State of the Internet With a Focus on India (2011). Internet audience 15+ accessing Internet from Home or Work Internet audience 15+ accessing Internet from Home or Work have helped e-commerce get a larger share of the consumers’ that of candidates. The major wallet,” reported ‘Campaign India’. Job search job portals are Naukri.com, The eBay India Census 2011, The internet has simplified the Monsterindia.com, and which studied e-commerce search for the right job and Timesjobs.com. The allied consumer patterns, noted some presented an e-commerce services include resume key trends: Online shopping is opportunity. In India, a number building and employment mainstream and a pan-India of portals match a prospective counselling. phenomenon, rural buyers and employer’s requirements with sellers are increasingly making their presence felt, and the number of women shoppers is Career services and development growing. sites growth Kashyap Vadapalli, director (category and business INTERNET USER PENETRATION (MARCH 2010) development), eBay India, told ‘Campaign India’: “We see INTERNET USER PENETRATION (MARCH 2011) aspiring consumers from smaller cities latching on to online shopping like never before.” 40% 37% These consumers, he pointed out, have the aspiration for brands and 22% 25% 23% lifestyle products, but no access. 19% Online shopping destinations resolve this problem. Added Fundsupermart’s D’Souza: INDIA ASIA - PACIFIC WORLDWIDE “[Online retailing] will give strength to the Indian growth Source: Comscore State of the Internet With a Focus on India (2011). story by broad-basing the Internet audience 15+ accessing Internet from Home or Work consumption story across India’s many towns, cities and all genders.” tailing will grow. Internet Online retailing retailers, because they don’t Some of India’s leading retail As web connections improve have to invest in brick and stores include Pantaloon’s and credit cards become more mortar stores or a large staff FutureBazaar.com, Flipkart.com common, online retailing or e- and because of the saving and Indiatimes.com.14 15
  9. 9. Opportunities existent in tiers 2 and 3 cities),” past that mark. In India, for changed the way banking pointed out 20:20 MSL’s Ahuja. instance the e-commerce was traditionally perceived. “Data shows that most goods growth rate has been projected ‘Demat’ (electronic) shipped are reached to cities as 51%. accounts for sale/purchase with a population of 3 million or of stocks and shares, foreign less. Also, the internet user Virtual businesses exchange services, base is expected to grow to 120 direct/instant payment of million soon, so there will be E-commerce has enabled bills on the account- new users to target.” enterprises to become virtual holder’s behalf, financial businesses. A virtual enterprise planning and advice, KIPL’s Patel believes that the electronic funds transfer are opportunity is “infinite”. is a modular structure of companies, customers, just a few of the services “Commerce is more than offered online. 10,000 years old. E-Commerce competitors, suppliers, linked is only 15 years old. As of now, by information technology. The • Credit/debit cards: Banks India has very few websites web is used to share skills, have empowered people know, remember or costs, and access one anothers consumers with credit and trust. We need many more,” he markets. debit cards, without which e- said. He pointed out that e- The flexibility of a shared commerce would be commerce also provided an network allows companies to impossible. opportunity to empower maximise the use of resources smaller entrepreneurs in • Information directories: and compete in a complex remote areas. E-commerce The web offers a host of market. could also be the catalyst for information directories that ‘social product development’ list products and services and ‘crowd funding’, said Patel. Lower search costs with appropriate sub- headings for those looking His views were echoed by Tlabs’ In terms of costs, e-commerce for information. Message Jain. “The opportunity lies in spells good news. The Internet boards, chat rooms and tapping into markets that encourages high transparency forums add to the haven’t been easily accessible - in prices. As competitors interactive experience. rural areas, for example - as publish their prices on the web, broadband and mobile Internet there are search engines that technologies become more monitor prices across websites. pervasive,” he said. This is supplemented by the growth of protocols such as XML. Global trade There are also fears that price E-commerce has changed the transparency may prompt way businesses approach collusion. However, increased globalisation. Businesses are communication and frequent leaning towards International market interactions will deter Financial Reporting Standards this. (IFRS), and internet financial reporting. While the former is a global standard for accounting The rise of facilitators and financial reporting, the The opportunities for e- argument, but it’s also a truism population is under 25 years of The internet today is flooded latter has been extremely commerce — in fact, businesses that the above factors will age, and they are growing richer with facilitators that simplify helpful to e-commerce in general — are well collectively be the growth as they join the workforce. Per electronic transactions. companies. documented: rising incomes, engine for e-commerce. capita is on the rise. The 8% GDP growth, a young internet offers better deals and Globally, the annual growth rate • Net banking/phone population with high “The opportunities are plenty. a wider variety compared to of e-commerce is estimated as banking: Online banking is a aspirations. Call it a clichéd Almost half the Indian supermarkets (which are non- 28%. Some countries are way powerful tool and has16 17
  10. 10. Challenges Very often, the payments carry risk that people are not easily Furthermore, loopholes in the The Information and the baggage of octroi, entry tax, willing to take. current legal and regulatory Technology Act was passed to VAT and several state - specific framework, lack of assurance in make e-commerce safe. It Cyber crime is a serious concern forms that can be baffling. safeguarding the privacy of imposes heavy penalties on the world over. It is a law personal and business data, those who misuse the channel enforcement challenge for lack of payment gateways have to defraud others. governments. Logistics hampered the growth of e- commerce. Customers want their goods delivered in perfect condition and within a specific time frame. Regular post is not a viable option and couriers have Common cyber crimes their limitations in terms of reach. All this adds to the costs. CRIME DESCRIPTION Shipping high - value goods might need insurance, which is Virus A program that attaches itself to applications or other software, an additional cost. damaging systems and files Phishing Perpetrator sends out e-mails that link to fraudulent websites, causing victim to release personal information Vendor Botnet Hacker transmits instructions to other computers for the purpose management of controlling them Very often, vendors end up Spoofing Use of e-mail to trick an individual into providing personal dealing with an inefficient information that is used for unauthorised purposes system for inventory management that affects the E-bank theft Perpetrator hacks into banking system, diverts funds to his/her delivery process. In most cases, accounts In India, the growth of e- there is no digital data for commerce has been steady but Payment products, no appealing visual, Netspionage Perpetrator hacks into systems or PCs to obtain confidential information slow. There is a clear lacuna in collection and and no mechanism to check daily prices. When sites are not the required resources and Online credit card fraud Illegal online acquisition of a credit card number and its infrastructure that has taxes updated regularly, they cease to unauthorised use hampered progress. attract buyers. Net payment involves sharing Denial of service E-mail barrage, computer viruses or other techniques to damage or Experts point to several some revenue (4% or more). shut down systems hurdles. While With a thin profit margin, this Fundsupermart’s D’Souza means parting with half the Cyber crime in Software piracy Theft of intellectual assets pointed to low bandwidth, profits. Businesses also have to e-commerce Spam Unsolicited e-mail 20:20 MSL’s Ahuja said factor fraudulent charges and inventory based e-commerce is charge backs in their business One of the biggest fears that capital-inefficient, the revenue model. consumers have in e- models are shaky and there is commerce is cyber crime. little consolidation. Tlabs’ Jain, “The biggest challenge is in the Cyber crime includes criminal on the other hand, listed supply area of payments,” said acts such as viruses, phishing D’Souza. “Most end consumers and denial of service attacks AREAS OF CONCERN • Establishing trust and goods have made buyers chain automation, logistics, the are sceptical while paying that cause e-commerce winning confidence isn’t easy. suspicious. Logistics must lack of easy payment solutions • Quality of goods and services online, which has forced e- websites to lose revenues. Brick and mortar stores tend improve. and increased return in goods. is a concern. E-commerce tailers to organise to be more trusted, it’s no Srinivasan said that consumers E-commerce companies suffer firms need to focus on this. • Many sites lack detailed unconventional methods of surprise. E-commerce firms are “not adequately protected heavy losses due to stolen information about products payments.” • Security is promised, but not will have to work hard to gain against fraud, misleading assets, breakdown of websites and pricing. Transparency on always delivered. Increased consumers’ trust. claims or poor service”. This is why cash on delivery is a and so on. Apart from the this front is critical. investment in security will • Delivery times tend to be a preferred option in India. financial loss, the company’s bring more customers to this problem. Too many cases of However, it’s not the easiest reputation is at stake. For the platform. late deliveries or damaged thing for businesses. “Cash on customer, it is a loss at the delivery sucks and needs to mere push of a button and it’s a die,” said Jain.18 19

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